The breakup of the Ctrip and Royal Caribbean SkySea joint venture is yet another sign of changing tides of China’s cruise industry

In the past few years, China’s cruise industry has seen growth in the number of passengers of around 70 percent. This year, the number of passengers is expected to fall by about 14 percent.

The SkySea Golden Era will be sold to TUI AG’s Marella Cruises, after which operations will be wound down. Royal Caribbean owns a 50 percent share of TUI Cruises, a joint venture between TUI AG and Royal Caribbean. Royal Caribbean and Ctrip have promised to continue a strong partnership in the China market.

On March 19, Ctrip and Royal Caribbean announced that the joint venture they established in 2014, SkySea Cruise Line, will be ending operations. It was already clear in 2017 that the cruise industry would be facing challenges in China this year, with predictions that major cruise lines would be cutting capacity. The breakup of the joint venture established by the world’s biggest cruise company and China’s most important online travel agency (OTA), while not expected, is understandable given that the long-term growth potential of the cruise industry in China is unclear.

China’s “travel ban” on South Korea has been a major contributing factor in the faltering of the Chinese cruise industry

Much of this uncertainty is tied to political disputes in East Asia, namely between South Korea and China. South Korea has been a key cruise destination for cruises out of China. However, the ban on the sales of tour packages to Chinese citizens going to South Korean destinations has placed substantial strains on the cruise industry.

While all of this news doesn’t necessarily mean the end of the cruise industry in China, it does illustrate that international firms were perhaps overambitious in terms of their expectations for the development of the sector. Given the unprecedented growth that the Chinese outbound and domestic tourism industries have experienced, it was not entirely unreasonable to expect a similar increase in demand for cruise experiences in the China market.

In all likelihood, the cruise industry still has a bright future in China, but will not be experiencing the kind of growth that justifies the immense amount of fixed capital investment associated with the cruise industry.

The growth of China’s tourism market and the overall size of China market point to an eventual recovery in the cruise market.